Ai Partners Financial Inc.

The financial instruments intermediary business and insurance solicitation business are highly dependent on financial market conditions such as stock market trends, interest rates, and exchange rates. In the event of an economic slowdown or market deterioration, revenue may decline due to reduced investment appetite and shrinking transaction volumes. The Company seeks to mitigate short-term impacts by instructing affiliated IFAs on long-term diversified investment based on a goal-based approach; however, if such measures do not function sufficiently, sales related to the financial instruments intermediary business may decline, potentially affecting the Group's financial position and business results.

For FY2026 (ending March 2026), Rakuten Securities, Inc. and SBI SECURITIES Co., Ltd. accounted for 53.0% and 26.2%, respectively, of consolidated net sales, together representing approximately 80%, indicating an extremely high degree of dependence on specific business partners. Should changes occur in these partners' business environments, transaction policies, or contract terms, sales related to the financial instruments intermediary business could fluctuate significantly, potentially having a material impact on the Group's financial position and business results. As a countermeasure, the Company is working to increase the number of affiliated financial instruments business operators and other business partners.

Major online securities firms have been diversifying and moving toward fee-free structures for stock trading commissions and investment trust sales commissions, which could threaten the revenue base of the financial instruments intermediary business. The Company seeks to differentiate itself by enhancing the value of asset management advice provided by IFAs through a goal-based approach; however, if the trend toward fee elimination accelerates rapidly and customer satisfaction cannot be maintained, the number of IFAs experiencing declining revenue or ceasing business may increase, potentially reducing sales from the financial instruments intermediary business and system usage fee revenue.

The Group's business growth is concentrated in the financial instruments intermediary business through the provision of a business platform to IFAs, resulting in a high degree of dependence on this business. If the business environment changes or the competitiveness of the Company's services declines, sales from the financial instruments intermediary business and system usage fee revenue may decrease, potentially affecting the Group's financial position and business results. In response, the Company is working to enhance the added value of its platform for IFAs and to expand business alliances with related service providers.

An increase in the number of affiliated IFAs is an important management indicator directly linked to increased consolidated net sales; however, the number of IFAs may not increase as planned due to contract terminations resulting from mismatches with IFAs, intensifying competition for IFAs among competitors, or critical reputational issues concerning the Group. Sluggish growth in the number of IFAs would lead to a decrease in sales from the financial instruments intermediary business and system usage fee revenue, affecting the Group's financial position and business results. The Company is working to improve IFA satisfaction by diversifying contract forms and expanding business and success support.

The establishment of the financial services intermediary business has lowered barriers to entry into the financial instruments intermediary business, and new entrants and expanding competition are expected. The Company seeks to differentiate itself by ensuring IFA independence and maintaining and improving high satisfaction with its platform; however, if its competitiveness declines, the number of IFAs may not increase as planned, potentially reducing sales from the financial instruments intermediary business and system usage fee revenue, and affecting the Group's financial position and business results.

Joji Tanaka, Representative Director, President and President Executive Officer, has been deeply involved in the growth of the financial instruments intermediary business and plays a critical role in recruiting prospective IFAs and formulating and executing management strategy, resulting in a high degree of dependence on him for business operations. Should Mr. Tanaka or part of the management team become unable to perform their duties for any reason, this could affect the Group's financial position and business results. The Company is working to strengthen its organizational structure to establish a management system that is not overly dependent on any specific individual.

The Group is registered to conduct the financial instruments intermediary business under regulations including the Financial Instruments and Exchange Act, and if a violation of laws or regulations occurs, business suspension or registration revocation may result. Additionally, if amendments or enactments of related laws and regulations constrain business activities, or if requirements such as mandatory employment of registered sales representatives or recognition of IFAs as "employees" arise, fundamental changes to the current business model may be unavoidable. The Company strives to develop its internal control and compliance systems, and to date no facts constituting grounds for registration revocation have occurred.

If a compliance violation occurs involving an IFA, officer, or employee, the Company's social credibility may decline and it may be held liable for damages. The Company requires IFAs to regularly undergo compliance training and confirmation tests provided by their affiliated financial instruments business operator and the Company's own programs, and conducts continuous monitoring; however, if such education, guidance, and monitoring do not function sufficiently, this could affect the Group's financial position and business results.

The Group handles confidential customer information and personal data. If unauthorized external access or human error results in an information leak, the resulting loss of social credibility could affect the Group's financial position and business results. Additionally, if a power outage, cyber-terrorism, or other event causes significant damage to or prolonged suspension of information systems or communication means, the Company may become unable to properly conduct its operations. The Company has implemented measures such as establishing basic regulations for personal information management, performing regular backups of server data, and migrating to cloud-based systems.